The Housing Bubble

The LA Daily News reports from California “Home sales in the San Fernando Valley plunged a record 35 percent last year to their lowest level in more than two decades as fewer buyers qualified for loans amid the ongoing mortgage meltdown, the Southland Regional Association of Realtors said. Annual home sales in 2007 fell to their lowest level since record-keeping began in 1985. December sales fell an annual 51.6 percent, to 390 transactions. Condominium sales fell 55.6 percent.”

“At the end of December, 5,671 properties were listed for sale in the Valley, a nearly 11-month supply.”

“In December, the median price dipped to $557,000, an annual loss of 12.4 percent, or $76,000. The median price topped out at $655,000 last June and has fallen 15 percent since then - back to levels last seen in the second quarter of 2005. It declined and finished below $600,000 each month of the year’s final quarter, the group said.”

“‘I don’t think the Valley will be as impacted as the rest of the state or nation,’ Jim Link, executive VP of the Realtors group, said of the foreclosure situation. ‘There will be an impact on prices but I don’t think they will tumble 20 (percent) or 30 percent.’”

“‘Banks are not going to dramatically slash prices and take a huge loss,’ Link said. ‘Banks want to recoup their investment, and that means they will list properties competitively at prices below comparable homes, but certainly not at fire-sale prices.’”

“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., said he expects activity this year to mirror that of 2007. ‘I don’t think we will see any signs of a recovery in the upcoming months,’ he said. ‘Then the question is what is a recovery. Unit sales will start to tick up and prices will start to tick up but it won’t be double-digit (percentage) increases.’”

The Signal. “Just under 2,000 single-family homes sold in the Santa Clarita Valley in 2007, making it the lowest annual total since at least 1998, according to a report released from the Southland Regional Association of Realtors.

“The annual median price of homes also fell for the first time on record, as well as the annual tally of sold condominiums in the valley. Three of the last four years have posted sales declines after six consecutive years of typically double-digit increases in sales, according to the association.”

“In the report, Doreen Chastain-Shine, 2008 president of the Association’s Santa Clarita Valley Division said, ‘I truly do not expect resale prices to go down all that much. Still, sellers don’t want to believe what’s happening, that the market has shifted in favor of buyers. Sellers are still not being realistic.’”

“At the end of December, there were 2,100 active listings throughout the Santa Clarita Valley, up 9.4 percent from a year ago, the association reports. At the current pace of sales, the inventory represents a 12.7-month supply, continuing the buyers’ market.”

“‘The mindset that real estate values never go down simply is not true,’ Link said. ‘Like any commodity, real estate has its peaks and valleys, but over time owning a home in California has always been a solid investment that continues to increase in value.’”

From The Sun. “You wouldn’t expect to see home developers using independent real-estate agents to sell new houses in a hot market. Besides: If the price is right, and interest rates low, why should they? Those days are long gone.”

“The new home market has taken such a beating that big-name builders are rewarding outside real-estate agents with Starbucks gift cards, wine bottles and even $10,000 checks to sell homes as fast as possible, and rewarding buyers with new cars and major discounts.”

“Take Janey Cole, for instance. The real estate agent with Redlands-based Century 21 Lois Lauer Realty won $10,000 on Monday from a drawing she was placed into by Beazer Homes because she recently sold a home in the builder’s Redlands Village project. She’s never seen an incentive like this one.”

“‘Any time the market gets like this, all the builders out there who never really offer us anything … start courting us a lot more,’ Cole said. ‘What that says to me is: ‘Here’s our inventory - get rid of it.’ They must be under some big gun because they’re spending money to do this.’”

“Toll Bros. - with new homes in Ontario, Rancho Cucamonga, San Bernardino and Highland - is another case in point. Cole’s name was randomly drawn yet again, and she’s now looking forward to a free one-hour counseling session with a top-notch Toll Bros. selling representative. It’s worth $350.”

“‘They’re doing whatever they can to sell homes,’ she said.”

“Buyers are being targeted, too. Whoever purchases one of two houses in La Verne represented by Century 21 Masters of Glendora gets their choice of owning a new Toyota Prius or having $25,000 slashed off the sale price.”

“The house for sale on Fruit Street is going for about $599,000, and the one on Emerald Avenue for about $689,000.”

“‘In this market, with the massive amount of inventory available and what may be a tsunami of upcoming foreclosures, we have to cause that property to be a standout,’ said Mark Cofer, real-estate broker for the homes.”

“Building industry expert Frank Williams said dozens of builders with new housing tracts across the Inland Empire will keep offering these ‘creative’” incentives.”

“‘The builders are anxious to get rid of their inventory, and they want as many people out there selling homes as they can get their hands on,’ said Williams, the CEO of the Rancho Cucamonga-based Baldy View Chapter of the Building Industry Association of Southern California. ‘They need to get rid of inventory, so they’re pulling out all the stops.’”

The LA Times. “Shares of Standard Pacific Corp., the Irvine builder that has lost more than three-quarters of its value in the last year, rose after getting a waiver from lenders to avoid a default. Banks extended loan terms until March 30, Standard Pacific said in a regulatory filing Tuesday. The company said Monday that it cut debt and inventory in the fourth quarter and fiscal year.”

“The housing market remains challenging and it’s ‘hard to predict’ a recovery, Standard Pacific CEO Stephen Scarborough said. The company has been hampered because it gets most of its revenue from California, where existing home sales fell 33% in December.”

“‘In many of our markets we’ve seen considerable erosion of pricing, particularly in the California, Arizona and Florida markets,’ Scarborough said. ‘In many markets, we’ve gone back to 2004 pricing.’”

The Voice of San Diego. ” If you’re sick of paying your mortgage while your house loses value, just walk away. That abandon-ship advice, phrased a variety of ways, isn’t relegated to the societal fringes anymore.”

“People shouldn’t get into or out of housing contracts just to make or avoid losing money, said Gabe del Rio, director of a nonprofit consortium of homeownership and housing counseling groups.”

“‘Housing prices have always gone up and fallen and gone back up again — putting a timeline to it intelligently is impossible,’ del Rio said. ‘If you’re buying a home for an investment, that’s not the reason we recommend. It should be so that it’s your home. Whether or not it has equity in it, it’s actually pointless.’”

“The up-and-down equity watching was far from the mind of one University City homeowner, who bought a one-bedroom condo there in May 2004. He financed it 100 percent, planning to stay in the unit for at least two years before selling and maybe moving up.”

“But the market stopped ascending and his family grew and now the homeowner is weighing his options. He asked for his name to be withheld to avoid the stigma, and potential legal implications, while he contemplates foreclosure.”

“After buying the condo, he got married, and when his wife became pregnant a year ago, they knew the condo wouldn’t be enough space. At that point, the unit would’ve sold for about $30,000 to $40,000 less than he’d paid.”

“He decided to hang on to the unit and hope for a market turnaround. In the meantime, he moved out with his wife and baby, and they lease the condo to a tenant for about $1,000 a month less than they pay for the interest-only option on their monthly mortgage payment, while also paying their rent elsewhere.”

“Every once in a while, he checks online to see what comparable units are selling for. The value has dropped to about two-thirds of what he paid now, he estimated.”

“‘This is so much beyond my worst expectations,’ he said. ‘I don’t see it coming back anytime soon. Is it going to take five years, 10 years, just to get back to where it was then?’”

“He joins a growing group of people facing the leave-or-stay quandary. ‘I want to honor what I signed,’ he said. ‘But I have to make a business decision that I have to make for my family.’”

From CNN Money. “‘I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months],’ said one borrower, David, who doesn’t want his last name used. ‘Now, I’m just waiting for the default notice.’”

“The Los Angeles-based writer bought two properties in Hancock Park, west of downtown, using no-down, interest-only mortgages in 2006. He paid just over $1 million for both.”

“David had planned to sell them quickly but got caught in the slump. Soon his interest rate will jump by a few points, and his payments will go up by several hundred dollars a month for each place. He figures his properties have fallen in value by at least $60,000 each.”

“And now skipping out on a home is easier, thanks to the Mortgage Debt Relief Act of 2007. Previously, if a bank sold a foreclosed home for less than the mortgage balance and it forgave the difference, the borrower had to pay tax on that difference as if it were income. Now the IRS will ignore it.”

“‘That’s going to help a lot of people,’ said Mike Gray, a San Jose accountant.”

“The trend of walking away is most pronounced among real estate investors, according to Jay Brinkman, an economist with the Mortgage Bankers Association (MBA). But families are doing it too. ‘If they have to stretch to make mortgage payments for a home that will not recover its value, then yes, they may walk away,’ he said.”

“HouseBuyerNetwork.com CEO Duane LeGate says that Susan’s (not her real name) two-bedroom condo in Sonoma County is worth $340,000, but the mortgage balance is $380,000. She can’t refinance and it’s difficult to sell.”

“She’s still trying for a short sale but, said LeGate, ‘She’ll almost certainly end up walking away.’”

From Forbes. “Even Hollywood’s rich and famous can’t avoid the housing downturn that’s sweeping the nation. In Los Angeles, only 4,430 homes were sold in December, down 48% from the previous year. And prices fell 11% to an average $470,000.”

“Of course, celebrity homes cost much more than that. An entry-level house for an up-and-coming star costs at least $1.4 million in L.A., say experts. Realtor Barry Sloane of Sotheby’s International Realty says it’s the owners trying to sell homes in the $3 million to $6 million range that are having the most trouble.”

“‘A lot of those people are involved, in one way or another, with the strike,’ says Sloane. ‘They’re upgrading from lesser houses that they’re having trouble selling because of the market, so it’s like a domino effect.’”

“Young rocker Avril Lavigne has had to reduce the price on her five-bedroom, six-bath house in Beverly Hills from $6.9 million to $5.8 million. The property is currently in escrow. Since she put the house on the market in February 2007, two offers have fallen through.”

“Former Guns N’ Roses guitarist Slash (also known as Saul Hudson) feels he overpaid for his Spanish-style Hollywood Hills home, which has a pool, a separate gym and stunning views. He bought the house in January 2006 for $6.2 million. He sold it last December for $5.7 million.”

“Slash is suing his former real estate agent, claiming the house was neither as big nor as private as the agent claimed.”

“Television star Wilmer Valderrama had to accept $200,000 less for his five-bedroom home in the relatively unfashionable Valley neighborhood of Tarzana. He sold the house in January for $1.75 million.”

“Johnny Carson sidekick Ed McMahon is also having real estate troubles. He put his 7,000-square-foot Beverly Hills home on the market In July 2006 for $7.7 million. He has since reduced the price three times, and the house is now selling for $5.7 million.”

“Sloane was originally trying to privately sell a historic Neutra home on Mulholland Drive, owned by Vidal Sassoon, for $25 million. When an offer fell through, he lowered the listing to $20 million. That was a year ago.”

“‘There’s usually a waiting list for homes over $20 million,’ says Sloane. ‘Now, it’s slowing down a tiny bit–for the first time in years.’”

From KSBY 6. “Senator Hillary Clinton addressed Central Coast voters this Super Tuesday. In her only local one-on-one interview, the former First Lady talked exclusively with Action News reporter Carina Corral about issues like immigration, the housing crisis, and her daughter’s stop here last week.”

“I asked Senator Clinton, ‘As President, what would you do to make housing more affordable in California?’”

“The senator’s answer was, ‘Well, I’m the only candidate in either party who has a specific plan. I will have a moratorium on home foreclosures for 90 days to help people work out staying in their homes, and I would freeze interest rates for five years.’”

Some housing bubble news from Wall Street and Washington. Associated Press, “Toll Brothers Inc. said Wednesday that home building revenue fell by 22 percent in the first quarter, its seventh consecutive quarterly decline, and warned that it’s ‘not yet seeing much light at the end of the tunnel.’ CEO Robert Toll, who months ago thought the housing market could be dancing along the bottom, said that despite historically low mortgage rates and falling home prices, a slowing economy could be spooking buyers.’

“‘Buyers seem to be hiding,’ he said in a statement. ‘The market’s problem is a lack of confidence, not just regarding the direction of home prices, but … the overall economy.’”

“Net signed contracts, a sign of future activity, were cut in half to $375.3 million. In the quarter, 257 contracts valued at $198 million were cancelled. The cancellation rate came to 28.4 percent in the quarter, compared with 29.8 percent last year during the same period.”

“In contracts, the Western states of California, Nevada, Arizona and Colorado plunged by 76 percent to $30.7 million. The North followed with 57 percent, the Mid-Atlantic at 37 percent and the South bled the least, down 26 percent.”

“In contracts signed before cancellations, the average price per home fell 13 percent to $634,000. After taking account cancelled contracts, the average price fell to $580,000 as buyers backed out of higher-priced homes.”

Dow Jones Newswire. “As the housing slump drags on, some builders have a deal for potential buyers: Sign a contract, and if the price of comparable homes drops before closing, you get the lower price.”

“It is a strategy shift for the ailing industry, which initially resisted price cuts as the market softened. Builders first offered freebies like granite countertops. Then, in September, Hovnanian Enterprises Inc. held a national ‘Deal of the Century’ bonanza offering discounts into the six figures, a move other builders quickly copied, even though it can drag down a neighborhood’s value and incense earlier buyers.”

“Dramatic price reductions, however, haven’t been enough.”

“There is also risk for builders and no assurances this will work: Last year, behemoth Lennar Corp. tested it in Florida, one of the states hardest hit by the downturn, but stopped.”

“Even after trimmed price tags, buyers could still decide to walk away, keeping cancellation rates elevated. And if prices decline during construction, companies could see gross margins, which hit 25% during the boom and have plummeted to razor-thin levels, further stressed.”

“Jeff Gibbs feels ‘peace of mind’ about the value of his $245,000 home being built, replete with crown molding and hardwood floors, that he contracted to buy near Phoenix. ‘If the market keeps on going down before I buy, I’m going to get the lower price and that means a lot,’ said the 28-year-old sales and marketing rep. ‘It’s almost like they’re thanking me for buying when I did.’”

The Daily Herald. “Sirva Inc., the moving company doing business as Allied Van Lines Inc. and North American Van Lines Inc., filed a pre-negotiated bankruptcy for itself and 58 affiliates, citing the slowing housing market.”

“‘Customers are simply not moving as much,’ Douglas Gathany, senior VP, said in court documents. He added consumers are delaying moves because they can’t sell their homes.”

“As part of its services to corporate clients, Sirva helps manage employee relocation programs, including helping the customer’s employees sell their houses, move and buy new homes, often buying the home for later sale. Under some of the contracts which work on a fixed fee, Sirva agrees to buy the home if it isn’t sold within a pre-determined period. It also assumes costs and losses on a resale of the home.”

“Their ‘home inventory is growing,’ Gathany said. ‘The homes stay in inventory longer, and many homes must be sold for a loss.’”

“Barry Diller’s IAC/InterActiveCorp reported Wednesday that it lost $369.9 million in its fourth quarter. Revenue at online mortgage referral unit LendingTree fell by 55 percent to $52.1 million as it dealt with a falling housing market. That unit swung to an operating loss of $508.1 million.”

The Budapest Business Journal. “South Korean local banks lost $563 million as of the end of December after investing in US subprime mortgage-related instruments, said the Financial Supervisory Service.”

“Seven local banks, including Woori Bank, the country’s No. 2 lender, invested $682.5 million in US collateralized debt obligations (CDOs) derived from subprime mortgages and lost 83% of their total CDO investments, the financial watchdog said.”

From Bloomberg. “U.S. Central Federal Credit Union, the non-profit company that invests on behalf of 8,400 local lenders, lost its AAA rating from Standard & Poor’s after reporting a $760 million drop in the value of subprime-infected securities.”

“The ratings service may downgrade U.S. Central again if the investments deteriorate further, analyst Robert Hoban said in the statement.”

“‘With the housing market weakening to levels not seen since the early 1990s down-cycle, we expect U.S. Central’s large portfolio of mortgage-related securities to further decline in value,’ Hoban said. ‘Earnings and capital measures already are under pressure.’”

“The amount represented almost 2 percent of the Lenexa, Kansas-based firm’s total assets. The $18 billion writedown Citigroup Inc. reported last month amounted to less than 1 percent of the largest U.S. lender’s assets.”

“‘I’ve never seen a market disruption or interruption like this’ during more than two decades working at credit unions and commercial banks, Executive VP Dave Dickens said. ‘Fixed-income markets are in a state of disarray.’”

“The fourth-quarter writedown reduced U.S. Central’s ‘net economic value’ by about half, according to financial statements released last week. Of U.S. Central’s $45.1 billion of assets, about 45 percent are ‘non-agency’ mortgage-backed securities, meaning they don’t carry a guarantee from a federal-government-sponsored entity such as Fannie Mae or Freddie Mac.”

“Less than 2 percent of total assets are in securities backed by subprime mortgages, Dickens said.”

From Reuters. “The CEO of accounting firm PricewaterhouseCoopers expects more non-financial U.S. companies to report write-downs linked to the credit crisis, showing the problem has the potential to infect a wide swath of corporate America.”

“‘It’s not just in banks,’ CEO Samuel DiPiazza told reporters late on Tuesday. ‘These securities sit in cash equivalent accounts of industrials; they sit in investment portfolios of pensions.’”

“‘We are having to deal with this with thousands of companies, not just a handful of big banks,’ he said, and added that a ‘first wave’ of write-downs was likely in the current audit cycle this quarter.”

“Last month Bristol-Myers Squibb Co became among the first companies outside the financial sector to disclose its exposure to the world-wide credit crisis. Over the last few months, other non-financial companies such as networking-equipment maker Ciena Corp and software company Lawson Software Inc have also reported write-downs related to the credit crunch and the housing sector meltdown.”

“DiPiazza declined to comment on how big he thought such write-downs would be, saying it varies with companies.”

“‘I will not underestimate the challenge we have working through a lot of complex securities and getting them valued,’ he said. ‘We have to ask the question, what’s under the surface.’”

“The U.S. Securities and Exchange Commission’s review of the credit rating agencies is in process and agency staff may make some recommendations on how to improve disclosure and conflicts of interest as early as June or July, a senior SEC official said on Tuesday.”

“Last year, the investor protection agency gained oversight of the credit rating agencies such as Moody’s Corp, Standard & Poor’s and Fitch, which have been blasted for not responding quickly enough to the deteriorating conditions in the subprime mortgage market.”

“Rating firms have been accused of conducting weak analyses and granting higher ratings because they are paid by the companies or issuers whose securities they rate. Critics also blame them for failing to highlight risks secured by pools of mortgages, including subprime mortgages for U.S. borrowers with tainted credit.”

“FDIC Chairman Sheila Bair, who spoke at the summit earlier in the day, said said the industry needs greater transparency about the quality of the assets ultimately underlying the products they’re rating.”

“‘They don’t even look at the underlying quality of the assets,’ Bair said at the Reuters Summit.”

“A global forum of financial watchdogs will call for greater disclosure on securitised products when Group of Seven finance officials meet on Saturday in Tokyo, Japan’s Nikkei daily reported.”

“The Financial Stability Forum, a group of central bankers and regulators from 12 industrialised nations, will present the G7 officials with an interim report on the causes of the global market turmoil and ways to prevent such problems in future.”

“To prevent further turmoil, the forum’s report calls for rating agencies to provide investors with more information to make their rating methods more transparent, the Nikkei daily said. It will also recommend that these institutions build up enough convertible assets to prepare for liquidity risks and that authorities tighten controls on risk assets, the Nikkei said.”

“Subprime mortgages were the driving force behind a boom in structured finance as banks bundled risky U.S. mortgage assets into complex instruments and sold them to investors worldwide.”

“It also asks authorities to examine whether current practises that rely greatly on rating agencies is weakening market discipline, the Nikkei said.”

From MarketWatch. “Goldman Sachs Chief Financial Officer David Viniar said Wednesday that the firm wants to be a buyer of distressed mortgage debt. ‘We will be a buyer if there is a seller, at a reasonable price,’ he said.”

“He added that among subprime mortgage securities, he reckons they are likely near fair value, because, ‘you can’t go below zero.’”

“U.S. credit markets are trading as if the economy is in a recession because investors’ ‘fear has overwhelmed greed,’ Goldman Sachs CFO David Viniar said today. ‘Credit markets are trading like we’re in the middle of the worst recession we’ve seen in a very, very long time,’ Viniar said at an investor conference.”

“Gregory Fleming, Merrill Lynch & Co.’s chief operating officer, said at the same conference that while ‘there’s a lot of liquidity,’ the climate for deals had deteriorated, and many investors are waiting to make sure the worst is over.”

“‘There clearly is a lot of nervousness and indeed even fear out there,’ Fleming said.”

“Viniar also said he expects to see a plan devised that will help the monoline bond insurers, which are facing potential rating downgrades. Insurers including MBIA Inc., Ambac Financial Group Inc. and Financial Guaranty Insurance Co. are at risk of losing their AAA ratings because mortgage-backed securities they’ve insured have declined in value.”

“New York State Insurance Superintendent Eric Dinallo told a meeting of Wall Street banks and brokerages that they ‘created this mess,’ making necessary a plan to rescue bond insurers, the Wall Street Journal reported today, citing people familiar with the matter.”

“‘It is likely that you will see some solutions to what’s going on with the monolines,’ Viniar said.”

“The senior Republican on the Senate Finance Committee called on Tuesday for more public disclosure and transparency in the mortgage market.”

“Sen. Charles Grassley said more transparency, such as the disclosures mandated by the Securities and Exchange Commission, is needed in the troubled market for mortgage- backed securities.”

“‘Included in transparency is some sort of reporting so that somebody in government knows what’s going on. It’s kind of along the lines of what the SEC’s supposed to be doing,’ Grassley said at the Reuters Regulation Summit in Washington.”

“‘If there’s criminal activity — and the FBI’s investigating it — heads ought to roll or it’s going to be repeated,’ Grassley said.”

“In addition to more transparency and disclosure, Grassley called for more accountability along the debt securitization chain, starting with originators of mortgages.”

“‘People that originate this stuff ought to have skin in the game. They don’t have any skin in it. You negotiate it and you get your money and you can run for the woods,’ he said.”

“‘And then the financial institution. I think the best way to make sure this doesn’t happen again, when you pass these on to somebody else, you ought to have some little bit of risk — one percent, five percent, I don’t know what the magic percent is … You just can’t dump your problems on somebody else,’ he added.”

“There ought to be some relationship between that financial institution and these people that are negotiating these things,’ Grassley said, adding that originators need to pay more attention to the income and ability to repay of borrowers.”

“‘We’ve got evidence that they gave loans to people who didn’t have jobs or even bothered to look to see if they did,’ he said.”

The Courier News from New Jersey. “When Barbara Taylor, a Realtor in Bridgewater, inherited two homes from her brother a couple years ago, she thought the one in Bridgewater would sell as fast as the one in Lavallette. She put them both on the market last year, hoping to get out of the landlord business. What happened was not what she expected.”

“Her listing Realtor in Lavallette suggested a price of $675,000. Nothing happened all spring, so Taylor rented the place during the summer. She got one offer of $500,000, which she turned down. Then she took a closer look at the market. She realized that… comparable homes in her neighborhood were more in line with the $500,000 offer. So in August, she dropped the asking price to $499,900 and immediately got two offers. The house was sold by September.”

“The Bridgewater house still hasn’t sold, even though Taylor has installed a new kitchen and made many other improvements. ‘I think the values at the Shore are holding better than they are in Bridgewater,’ she said.”

“Tino Columbo, manager of Diane Turton’s Point Pleasant Beach office, said that in Ocean County, which includes the Point Pleasant and Long Beach Island areas, there were 5,747 homes sold in 2005, 4,479 sold in 2006 and 3,893 sold in 2007.”

“In 2005, the average seller got 96.57 percent of his asking price. In 2006, sellers averaged 95.68 percent of their asking price, and in 2007, they averaged 94.7 percent of the asking price. The question that Columbo’s figures can’t answer is how much have asking prices dropped. ‘The value is still in the land,’ he said. ‘If a home is priced right, it’ll sell, but if the seller is unrealistic, it won’t sell.’”

“‘I think we’ve seen the worst,’ said Dan McDonald, proprietor of Central State Appraiser Service in Lake Como. ‘I think we’ve come close to the bottom, but I don’t see a substantial turnaround until 2013 or 2014. The value of homes overshot what it should’ve been because of creative financing.’”

“‘The bottom of the market will suffer,’ McDonald said. ‘If McMansions and higher-priced homes sell at discounts, then the smallest, least-expensive homes will have fewer buyers…The values decline most in communities where there is still a lot of land to develop.’”

“‘Prices are lower than they were at the peak a few years ago, and interest rates are below 6 percent,’ said Mary Burke is the broker of record for Heritage House Southeby’s International Realty, a company with five offices in upscale Monmouth County communities. ‘We’ve seen the market start to pick up. I think that at the end of 2008, people who didn’t buy now will look back and wish they did.’”

From Financial Week on New York. “A foreclosure sale on tony Further Lane in East Hampton, N.Y.? A year ago, such an event would have been practically unthinkable. Yet a Further Lane property was in the early stages of foreclosure last month.”

“John Brady, an agent in the East Hampton area who handles the sale of foreclosure properties for banks on eastern Long Island, confirmed that a $15 million Further Lane home was in pre-foreclosure status due to delinquent payments. The owner apparently brought his account current about two weeks ago, avoiding any further legal action.”

“Mr. Brady said a year ago, the possibility of a foreclosure wouldn’t have arisen. Now, the Hamptons, the summer hangout for Manhattan’s rich and famous, is seeing its fair share of troubled real estate.”

“There are about 40 homes in various stages of foreclosure in East Hampton and another 40 in Southampton, he said. ‘A year ago, you just didn’t see that.’ The houses involved include a $4 million property, although most are more modest homes, he said.”

“Mr. Brady said some buyers put little money down on their purchases, believing that the properties would not only serve as vacation getaways, but as rapidly appreciating investments and tax write-offs.”

“Mr. Brady noted that 1,030 homes in East Hampton are currently listed for sale. That’s up about 40% in the past year alone. ‘People are still being unrealistic’ about resale values, he said. ‘I say if you want to sell right now, take the last sold [nearby property] and knock off 5% or 10% to beat the curve in a declining market.’”

“In East Hampton, the last property sold on Further Lane, a beachfront estate on two acres, went for $25.7 million on Nov. 9, according to a published registry of deeds record. The prospect of a foreclosure just down the lane must have had the new owners in a Gatsby-esque tizzy.”

The Boston Globe from Massachusetts. “The City of Boston conducted a lottery last summer for 18 homes in Dorchester, expecting a huge demand. Only 10 homes sold. The city and local nonprofits are now spending money marketing the rest.”

“In Lowell, three units in a subsidized condominium project sat unsold for almost a year before a community development agency decided to convert them to short-term rental housing for needy families.”

“A Worcester nonprofit slashed prices this summer on six condos, then hired a local real estate firm to help sell the units, which have now been on the market al most 20 months.”

“‘In the city of Worcester, affordable housing is no longer a bargain,’ said Marti Orne of Achieva Realty. ‘People say, ‘Look, I can buy something without deed restrictions.’”

“‘For years the for-sale market was so strong and so tight that as long as you developed a unit that was affordable, it would just sell,’ said Tina Brooks, undersecretary of housing for Governor Deval Patrick.”

“During the boom, housing lotteries sometimes drew 100 applications for each available unit. Now, a growing number are sold to the first interested buyer, according to industry participants.”

“Housing advocates say people are scared by the spike in foreclosures. ‘People are not willing to pull the trigger,’ said Tom Callahan of the Massachusetts Affordable Housing Alliance. ‘There’s more nervousness about, ‘Is this going to go bad for me like it did for the person down the block?’”

“Falling prices may be the largest factor. Worcester Community Housing Resources Inc. listed nine condominiums for sale in May 2006. Three sold before the market declined in earnest. This summer, the nonprofit slashed prices by up to 20 percent on the remaining units. A two-bedroom can be had for $114,900.”

“‘In 2003, if you wanted to buy a condo’ in that price range, ‘there were only about 18 on the market in Worcester, at any given time,’ said Adam Pasquale, who owns Achieva Realty. ‘Today there’s 90 on the market.’”

“The firm has shown the units to almost 70 buyers. One signed a contract.”

The Enterprise from Massachusetts. “When the new condo lofts on Court Street in Brockton went on sale a year ago, a two-bedroom-two-bath unit was priced at $214,000. Now the price is as low as $165,000.”

“‘We’ve had to respond to the market,’ said Ellen S. Goldberg, a spokeswoman for Cathartes Private Investments, which helped develop the Court Street development, known as SoCo146.”

“Other developments and projects in the downtown Brockton area face similar situations. Realtor Bernie Hassan said a saturated market and falling prices have created a buyer’s market almost unlike any seen before. ‘The selection is tremendous,’ he said.”

“The Warren Group reported that single-family home sales in Plymouth County have dropped by 30 percent over the last year, with prices falling by 17 percent.”

The Eagle Tribune from Massachusetts. “There are at least 90 homes in trouble in the city — empty buildings that have either been seized by banks or are in the process of being seized through foreclosure proceedings, Mayor James Fiorentini said.”

“It’s a relatively low number compared to neighboring cities such as Lawrence, the mayor said, but he and other Haverhill officials are worried abandoned buildings are becoming more common in Haverhill as a result of the real estate slump and national mortgage crisis it has spawned.”

“‘I don’t think it’s quite a crisis here yet, but we want to address it now before it becomes one,’ Fiorentini said. ‘Just one abandoned building can ruin a neighborhood.’”

“Several inner-city streets in Haverhill have more than one abandoned building. A tour last week of Nichols Street in the Acre neighborhood, for instance, revealed six multi-unit, empty homes on a short stretch in various stages of dilapidation.”

“Signs on three of the homes said they were bank owned and that electricity and water had been shut off.”

“The city becomes aware of vacant buildings primarily as inspectors and fire officials come across them as they travel around the city, Building Inspector Richard Osborne said. ‘The biggest problem is when we can’t find the mortgage holder,’ Fiorentini said. ‘We need someone to cite and someone to go after.’”

The Littleton Independent from Massachusetts. “It’s the first time that realtor Kathy Knox can remember the town having such a low inventory of homes for sale. Knox said there are currently just 38 houses for sale in Littleton.”

“‘For the last year and a half, it’s been a much more volatile market,’ she said. ‘Homes are selling, but only if they are ‘aggressively priced,’ or lower than the seller’s expectations, and in good shape.”

“She said the inventory is so low because sellers ‘got discouraged’ when their homes didn’t sell at the asking price, and took the property off the market. She said sellers might have had ‘unrealistic’ prices in mind.”

“Knox said the real estate market is going through a periodic ‘adjustment,’ or correction that hasn’t happened for 20 years or more. Throughout the 1980s and 1990s, she said, home prices kept going up, and a correction was due.”

“Knox said homes are now adjusting downward for the first time in two decades, and buyers that bought at the peak a couple of years ago, may not be able to keep up the payments. ‘I just sold a home that was assessed higher than I sold it for,’ said Knox.”

“She said sellers ‘do not want to come to the closing with $30,000 in their pocket,’ and sometimes arrive with the keys to hand back to the bank.”

“Cheryl Cowley’s mother started the family realty business, Cowley’s, on Great Road in the 1960s. Cheryl said now is the time to buy. ‘Mortgage companies are pretty comfortable with Littleton,’ she said, citing only six foreclosures in 2007. ‘I’m seeing some of the best deals in the last 10 years, and I think for 10 years to come. I think we’ve bottomed out.’”

“Cowley said she has seen ’some cute little houses for under $200,000.’ ‘It hasn’t been so low in as long as I can remember,’ she said.”

“She blames the media, in part, for the drop in prices. ‘With the papers shouting about falling prices, people are thinking they better wait, and it has become a self-fulfilling prophecy,’ said Cowley.”

“‘People have to be realistic,’ said Knox. ‘For years we saw people double their money in their homes. Now that is not happening.’”

“She said the only people that are getting hurt by the current market are those that bought a home in the last couple of years, and are forced to sell and move for some reason. Those families will not sell their homes for what they paid, in many cases.”

“‘They are stuck,’ said Knox. ‘We can’t sell it for what they paid just two years ago.’”

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